35,000 firms face probe for deposits after demonetisation

NEW DELHI: Cash worth 170 billion rupees was deposited and withdrawn by 35,000 companies following India’s demonetisation drive, raising suspicion of wrongdoing and prompting a probe, officials said on Monday.

Last November, the government scrapped 500 and 1,000-rupee notes as part of larger efforts to weed out “black money”or untaxed earnings. Inquiries from banks in connection with 58,000 accounts involving 35,000 firms revealed that more than 170 billion rupees were deposited and withdrawn post demonetisation, government spokesman DS Malik said. The amount is suspected of being unaccounted money — that was not supposed to return to the banking system — and the firms have been de-registered by the Ministry of Corporate Affairs. “They are believed to be shell companies, since they did not file their returns and did not act according to law. They will be asked to give their explanations,” Malik said.

A total of 224,000 companies that were inactive for a long time were struck from official records and more than 300,000 directors have been disqualified.

India’s growth slumped to 5.7 per cent in the previous quarter,mainly due to the effects of a cash crisis following the banknote measure, as well as a hastily implemented new composite goods and services tax.

Although officials insist that demonetisation is part of an ongoing fight to curb corruption and tax evasion, government figures released in August showed the drive failed in its objective of checking blackmoney since almost 99 per cent of the invalidated currency notes had been put back into the financial system. — dpa